Colquhoun-Denvers v Yunghanns (Notice to Produce)
[2023] VSC 583
•3 October 2023
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COSTS COURT
COSTS COURT LIST
S ECI 2022 01151
BETWEEN:
| NICHOLAS COLQUHOUN-DENVERS | Applicant |
| v | |
| PETER NICHOLAS YUNGHANNS | Respondent |
---
JUDGE: | Barrett AsJ |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 11 May 2023 and further written submissions filed by the Applicant on 22 May 2023 and 16 June 2023 and the Respondent on 29 May 2023 and 30 June 2023 |
DATE OF RULING: | 3 October 2023 |
CASE MAY BE CITED AS: | Colquhoun-Denvers v Yunghanns (Notice to Produce) |
MEDIUM NEUTRAL CITATION: | [2023] VSC 583 (revised 10 October 2023) |
---
PRACTICE AND PROCEDURE – Notice to produce – Application to set aside – Whether Notice serves legitimate forensic purpose – Whether Notice used as substitute for discovery – Whether Notice oppressive, overly broad or prejudicial – Whether foreign lawyer’s charges may be claimed as disbursements – Whether foreign lawyer acted as principal or agent – Santos Ltd v Delhi Petroleum Pty Ltd (2005) 240 LSJS 366; [2005] SASC 242 considered – Whether automatic presumption that local lawyer is principal – Elders Trustee & Executor Co Ltd v Estate of Herbert (1996) 5 NTLR 123 considered – Whether indemnity principle applies – Mainieri v Cirillo (2014) 47 VR 127 applied – Prohibition on engaging in legal practice by unqualified entity pursuant to s 10 of the Legal Profession Uniform Law – Not necessary to resolve the question whether foreign lawyer’s conduct constituted legal practice – Documents relevant to whether foreign lawyer acted as principal or agent serve a legitimate forensic purpose – ACN 096 450 770 (formerly AJH Lawyers Pty Ltd) v Mathieson Nominees & Anor [2017] VSC 559 applied – Notice not a substitute for discovery – Macks v Tucker (No 4) (2007) 250 LSJS 49; [2007] SASC 255 applied – Notice not oppressive, overly broad or prejudicial – Tony Azzi Automobiles Pty Ltd v Volvo Car Australia Pty Ltd [2006] NSWSC 283 applied – Application dismissed.
---
APPEARANCES: | Counsel | Solicitors |
| For the Applicant | Dr S B Levi | Batten Sacks |
| For the Respondent | Ms P A Neskovcin KC and Mr I H Percy | Strongman & Crouch |
TABLE OF CONTENTS
Principles regarding notices to produce........................................................................................ 4
Legislative framework in relation to foreign lawyers’ costs/disbursements......................... 7
Legitimate forensic purpose.......................................................................................................... 10
Are the documents sought relevant to the question whether Connon Wood’s fees are wholly recoverable?........................................................................................................................ 10
Are Connon Wood’s fees payable in any case under the indemnity principle?................ 14
Is there an automatic presumption that Batten Sacks is the principal lawyer?................. 18
Is the Notice being used as a substitute for discovery?............................................................ 20
Is the Notice oppressive, overly broad or prejudicial?............................................................. 22
HIS HONOUR:
By summons filed on 24 February 2023, the applicant Nicholas Colquhoun-Denvers (‘NCD’) seeks to set aside a Notice to Produce filed by the respondent Peter Nicholas Yunghanns (‘PY’) on 16 November 2022 (‘the Notice’).
This application comes at the tail end of a long litigious process that commenced with allegations by claim and counterclaim that each of the parties had defamed the other in emails generated between November 2015 and May 2016. Both parties failed at trial[1] and the Court ordered:
[1]Yunghanns v Colquhoun-Denvers [2019] VSC 433.
(a) on the claim, PY pay NCD’s costs of that proceeding on a standard basis;
(b) on the counterclaim, NCD pay PY’s incremental costs of that proceeding on standard basis;
(c) each party bear its own costs of the costs application; and
(d) the Costs Court, under r 63.34(4) of the Supreme Court (General Civil Procedure) Rules 2015 (Vic) (‘Rules’), have authority to allow, should it think fit, an increase in the fees set out in Appendix A to the Rules.[2]
[2]Yunghanns v Colquhoun-Denvers (Costs) [2019] VSC 853, [34] (T Forrest JA).
PY unsuccessfully sought to appeal the costs decision.[3]
[3]Yunghanns v Colquhoun-Denvers [2021] VSCA 15.
On 5 April 2022, NCD filed a bill of costs (‘the Bill of Costs’) which included at item 2243 an unconventional disbursement of $1,233,705.54 which is described as:
Fess of Connon Wood LL.P, civil litigation and international arbitration law firm, lawyers for Defendant, as set out in the marked up invoices annexed to this bill of costs and marked with the letter “A”
Total USD 922,917.64 converted to Australian currency on 29/3/22
Total of invoices AUD $1,233,705.54
PAID USD 625,811.52:
AUD $835,621.09
UNPAID AUD $398,084.45 1,233,705.54
Annexure A includes individual entries for in excess of 400 hundred days between 10 February 2016 and 18 September 2018. The entries itemise, in varying degrees of detail, the ‘professional services’ charged for each of the days.
On 6 July 2022, Costs Registrar Walton ordered, pursuant to r 47.04 of the Rules, that the question whether the disbursements are recoverable on a taxation be determined as a preliminary question. The terms of the question are important for reasons that follow, and are expressed below:
[T]he Costs Court will determine as a preliminary question whether the charges of Connon Wood LLP claimed as disbursements in the bill of costs filed by the Applicant in this proceeding are recoverable by the Applicant on taxation.[4]
[4]Costs Registrar Walton in Nicholas Colquhoun-Denvers v Peter Nicholas Yunghanns (Supreme Court of Victoria, S ECI 2022 01151, 6 July 2022) ord 1 (‘Order of Costs Registrar Walton’).
On 16 November 2022, pursuant to further orders made on 26 October 2022, PY filed the Notice, seeking production of 100 enumerated categories of documents.
On 24 February 2023, NCD filed[5] a summons seeking orders that the Notice be set aside. Stated broadly, NCD submits that: the Notice seeks discovery rather than production of specific documents; the Notice is oppressive as it does not clearly identify the documents sought but requires significant judgment on the part of NCD to determine what documents are responsive to the request for production, and further will involve significant and prohibitive cost; and, the documents serve no apparent forensic purpose.
[5]On 14 December 2022, consent orders were made extending the time for the applicant to file and serve any application to set aside the Notice to Produce to 24 February 2023.
NCD relies on:
(a) written submissions filed on 7 October 2022, 14 April 2023, 5 May 2023, 22 May 2023 and 16 June 2023;
(b) the affidavits of Harvey Stephen Bruce affirmed on 19 May 2022, 3 June 2022, 7 October 2022 and 23 February 2023;
(c) the affidavit of Robert A de By sworn on 13 October 2022;
(d) the affidavits of Trevor Michael Rosenthal affirmed on 14 April 2023 and 5 May 2023; and
(e) the Bill of Costs, as attached to the summons for taxation of costs dated 5 April 2022.
PY seeks an order dismissing NCD’s summons and seeks procedural orders for production and inspection of the documents, and the filing of submissions and hearing of the preliminary issue. PY submits that there is a significant factual dispute as to the role of Connon Wood LLP (‘Connon Wood’) in the litigation that emerges from the description of the role played by Connon Wood in the Bill of Costs. The issues that gives rise to are: whether Connon Wood was acting in the capacity of principal or agent and whether NCD was liable for the costs charged by Connon Wood. PY submits that if Connon Wood was in fact acting as principal, then NCD is not liable to pay Connon Wood’s costs, and further that none of the costs are recoverable. PY supports these submissions with the observation that the total fees of Batten Sacks, the applicant’s solicitors, was $278,348.83 and the total sum claimed by Connon Wood was $1,233,705.54.
PY relies on:
(a) written submissions filed on 2 September 2022, 28 April 2023, 29 May 2023 and 30 June 2023;
(b) the affidavits of Jonathan Leung sworn 16 May 2022 and 24 March 2023;
(c) a notice to admit dated 2 November 2022;
(d) a notice of dispute dated 15 November 2022;
(e) transcripts of the hearings on 6 July 2022 and 26 October 2022; and
(f) the materials relied on by NCD as set out above.
Principles regarding notices to produce
The Notice seeks production of documents pursuant to r 35.08 of the Rules. Rule 35.08 provides:
Notice to produce documents
(1) A party to a proceeding may serve on any other party a notice requiring that the other party produce the documents mentioned in the notice on any application in or at the trial of the proceeding.
(2) Unless the Court otherwise orders, the party on whom the notice is served shall produce on the application or at the trial such of the documents mentioned in the notice –
(a) as are in that party’s possession, custody or power; and
(b) which that party does not object to produce on the ground of privilege.
(3) Where the party on whom the notice is served fails to comply with the notice, the Court may order that the party produce the document or give such directions for the proof of any matter in relation to the document, including the contents of the document and its making, delivery or receipt, as it thinks fit.
It was accepted by the parties that the ‘considerations to be taken into account in deciding whether to set aside a notice to produce are the same as those that apply to setting aside a subpoena.’[6] The principles relevant to an application to set aside a subpoena were not in issue. The respondent relied on the summary of principles set out by J Forrest J in Volunteer Fire Brigades Victoria Inc v CFA (Discovery Ruling) (‘Volunteer Fire’).[7]A more recent summary of principles was set out by John Dixon J in Smith v Trustees of the Christian Brothers (‘Smith’)[8] as follows:[9]
[6]Cargill Australia Ltd v Viterra Malt Pty Ltd (No 19) [2018] VSC 798, [26] (Elliott J) (citations omitted) (‘Cargill’).
[7][2016] VSC 573, [55] (‘Volunteer Fire’).
[8][2023] VSC 171.
[9]Ibid [13]-[14] (citations omitted).
13 Where a subpoenaed party applies to set aside a subpoena, the issuing party must satisfy a two-part test. It must:
(a) identify precisely a legitimate forensic purpose for categories of documents sought pursuant to the subpoena, bearing in mind that both the production of documents or the absence of produced documents may assist a forensic purpose; and
(b) demonstrate that it is ‘on the cards’, or that there is a ‘reasonable possibility’, that the documents will ‘materially assist’ the issuing party’s case.
14 The primary judge applied the summary of principles identified by Derham AsJ in ACN 096 450 770 (fka AJH Lawyers Pty Ltd) v Mathieson Nominees [[2017] VSC 559], following his Honour’s review of the cases, and neither party submitted that it was inappropriate for the primary judge to do so. There was no dispute before me as to the principles governing the application. In Mathieson, the court said:
(a) it is necessary for the party at whose request the subpoena was issued to identify expressly and precisely the legitimate forensic purpose for which access to the documents is sought;
(b) except in cases where the subpoena is plainly too broad or merits the description of a fishing expedition, the judge should normally inspect the documents for the purpose of making a final decision as to whether a legitimate forensic purpose exists;
(c) however, the Court will not require production of subpoenaed documents, and will not permit access to subpoenaed documents, if the subpoena is expressed so broadly that the applicant cannot demonstrate, having identified a forensic purpose, that it is ‘on the cards’ or that there is a ‘reasonable possibility’ that the documents will materially assist the case of the party;
(d) a ‘fishing expedition’ is not a legitimate forensic purpose and will not be permitted;
(e) the relevance of a document to the proceeding alone will not substantiate an assertion of legitimate forensic purpose. There is no legitimate forensic purpose if the party is seeking to obtain documents to see whether they may be of relevance or of assistance in his or her case;
(f) a mere assertion of bad faith by an applicant or that something might be found demonstrating bad faith is not enough – the criteria set out in (c) must be satisfied; and
(g) where a party fails to demonstrate a legitimate forensic purpose, the Court should refuse access to the documents and set aside the subpoena.
I note that the principle expressed in para 55(b) of Volunteer Fire is in different terms to the principle at para 20(a) in the later decision of ACN 096 450 770 (formerly AJH Lawyers Pty Ltd) v Mathieson Nominees & Anor (‘Mathieson’),[10] which is quoted above at para 14(b) of Smith. The former states that ‘the identification of a legitimate forensic purpose is to be considered by the court without inspecting the documents sought to be produced’[11] whereas the latter held that ‘the judge should normally inspect the documents for the purpose of making a final decision as to whether a legitimate forensic purpose exists’.[12] The point was considered by the Victorian Court of Appeal in Woolworths Ltd v Svajcer (‘Woolworths’)[13] in which the Court observed obiter that where a legitimate forensic purpose referrable to the subpoenaed documents has been identified, the court should usually inspect the documents to determine whether the documents are referrable to that purpose.[14] However, the Court also observed that ‘[i]t will not usually amount to an error in the House v King [(1936) 55 CLR 499] sense for a judge to decide whether access should be granted to documents without inspecting them.’[15]
[10][2017] VSC 559 (‘Mathieson’).
[11]Volunteer Fire (n 7) [55(b)] (J Forrest J) (emphasis added).
[12]Mathieson (n 10) [20(b)] (Derham AsJ) (citations omitted).
[13][2013] VSCA 270 (Nettle, Ashley and Neave JJA).
[14]Ibid [40]-[47] (Nettle, Ashley and Neave JJA).
[15]Ibid [43] (Nettle, Ashley and Neave JJA).
In this case neither party suggested that the documents should be inspected prior to the determination of whether a legitimate forensic purpose exists. I do not consider it is necessary, nor appropriate, to inspect the documents before ruling because, first, the documents have not been obtained, and as discussed below, the difficulties in obtaining such documents is one of the bases upon which the applicant relies to set aside the Notice. Secondly, I note that the principle as it is expressed in Woolworths and Mathieson is not in mandatory terms but is qualified by the words ‘usually’ and ‘normally.’ In this case I consider that the question can readily be answered having regard to the issues in the case and the description of the documents sought by reference to the Bill of Costs and Annexure A to it. I am also conscious of the obligations of the Court and practitioners under the Civil Procedure Act 2010 (Vic), and the unlikelihood that the task of the Court inspecting the documents would be consistent with those obligations.
Regarding production of documents in the context of taxation:
(a) the party seeking to have its bill taxed bears the burden of establishing the costs are recoverable;
(b) where costs sought relate to legal advice or correspondence, a party may call for such advice to be produced in order to test whether it is recoverable. A party does not have to produce it, but, as put by Costs Registrar Walton at the hearing on 26 October 2022, ‘then the court can’t determine whether it’s reasonable or not and is likely to disallow it.’
The questions to be considered are:
(a) Do the documents sought by the Notice serve a legitimate forensic purpose?
(b) Is the Notice being used as a substitute for discovery?
(c) Is the Notice oppressive, overly broad or prejudicial?
Legislative framework in relation to foreign lawyers’ costs/disbursements
A considerable focus of this application has been on the relevant provisions of the Legal Profession Uniform Law (‘LPUL’),[16] in particular ss 9, 10, 60 and 69. Sections 9 and 10 provide as follows:
PART 2.1—UNQUALIFIED LEGAL PRACTICE
9 Objectives
The objectives of this Part are—
(a) to ensure, in the interests of the administration of justice, that legal work is carried out only by those who are properly qualified to do so; and
(b) to protect clients of law practices by ensuring that persons carrying out legal work are entitled to do so.
[16]Legal Profession Uniform Law Application Act 2014 (Vic) sch 1 (‘LPUL’).
10 Prohibition on engaging in legal practice by unqualified entities
(1) An entity must not engage in legal practice in this jurisdiction, unless it is a qualified entity (emphasis added).
Penalty: 250 penalty units or imprisonment for 2 years, or both.
(2) An entity is not entitled to recover any amount, and must repay any amount received (emphasis added), in respect of anything the entity did in contravention of subsection (1). Any amount so received may be recovered as a debt by the person who paid it.
(3) Subsection (1) does not apply to an entity or class of entities declared by the Uniform Rules to be exempt from the operation of subsection (1), but only to the extent (if any) specified in the declaration.
‘Qualified entity’ is defined in s 6 as follows:
qualified entity means—
(a) an Australian legal practitioner; or
(b) a law practice; or
(c) either—
(i) an Australian-registered foreign lawyer; or
(ii) a foreign lawyer who is not an Australian-registered foreign lawyer but only to the extent that the foreign lawyer’s legal practice is limited to the practice of foreign law and is carried out in accordance with the applicable requirements of Part 3.4 (emphasis added); or
(d) an individual engaged in legal practice under the authority of a law of the Commonwealth or of a jurisdiction, other than this Law or the Uniform Rules; or
(e)an entity engaged in legal practice of a kind specified in the Uniform Rules for the purposes of this definition, but only while the entity engages in the legal practice in accordance with any applicable requirements of the Uniform Rules[.]
Accordingly, a foreign lawyer may practice in Australia only to the extent that the foreign lawyer’s legal practice is limited to the practice of foreign law and is carried out in accordance with the applicable requirements of Part 3.4. Part 3.4 includes the following:
60 Practice of foreign law without registration but for limited periods
(1) A foreign lawyer may, subject to this Law, practise foreign law in this jurisdiction without having to hold a current Australian registration certificate—
(a)during one or more periods that do not in aggregate exceed 90 days in any period of 12 months (emphasis added); or
(b) during any period during which any restriction under the Migration Act 1958 of the Commonwealth has the effect of limiting the period during which work may be done, or business transacted, by the foreign lawyer in Australia.
…
Penalty: 250 penalty units.
…
69 Scope of practice
(1) This section applies to—
(a) a foreign lawyer who is practising foreign law under Division 2 (emphasis added); or
(b) an Australian-registered foreign lawyer.
(2) The foreign lawyer may provide only the following legal services in Australia—
(a) doing work, or transacting business, concerning the law of a foreign country where the lawyer is registered or authorised by the foreign registration authority for the country;
(b) legal services (including appearances) in relation to proceedings before bodies other than courts, being proceedings in which the body concerned is not required to apply the rules of evidence and in which knowledge of the foreign law of a country referred to in paragraph (a) is considered by the designated local regulatory authority to be essential;
(c) legal services in relation to arbitration proceedings or conciliation, mediation and other forms of consensual dispute resolution;
(d)legal services of a kind specified in the Uniform Rules for the purposes of this section (emphasis added).
(3)Nothing in this Law authorises the foreign lawyer—
(a) to practise Australian law in Australia (emphasis added); or
(b) to appear in any court, except on the lawyer’s own behalf or as permitted by the Uniform Rules.
(4) Despite subsection (3), the foreign lawyer may advise on the effect of an Australian law if—
(a) the giving of advice on Australian law is necessarily incidental to the practice of foreign law; and
(b) the advice is expressly based on advice given on the Australian law by an Australian legal practitioner who is not an employee of the foreign lawyer.
Legitimate forensic purpose
NCD submits that the Notice does not serve a legitimate forensic purpose because:
(a) the preliminary question is concerned only with whether the fees are wholly unrecoverable, and not partly (which is to be determined at taxation). Even if Connon Wood has engaged in legal practice without authority, that could only bar recovery of charges for that work, and would not extend to other work not conducted in breach of the LPUL;
(b) disbursements of the type claimed, once paid, are recoverable under the indemnity principle irrespective of whether the work was performed in breach of the LPUL; and
(c) there is an automatic presumption that Batten Sacks, as the local legal practitioner on the record, was the principal and not the agent.
Are the documents sought relevant to the question whether Connon Wood’s fees are wholly recoverable?
The preliminary question is framed as follows:
[T]he Costs Court will determine as a preliminary question whether the charges of Connon Wood LLP claimed as disbursements in the bill of costs filed by the Applicant in this proceeding are recoverable by the Applicant on taxation.[17]
[17]Order of Costs Registrar Walton (n 4) ord 1.
PY submits that if Connon Wood’s fees were incurred for services performed in contravention of the statutory prohibitions in the LPUL, then by operation of s 10, Connon Wood ‘is not entitled to recover any amount, and must repay any amount received, in respect of anything the entity did in contravention of’ the prohibition.[18]
[18]LPUL (n 15) s 10(2).
PY submits that there are numerous indications that the work Connon Wood did, and for which it charged, was work done in contravention of the statutory prohibitions in the LPUL. PY wishes to challenge the evidence of Mr de By that the work he did was merely in relation to factual issues, and PY says the production of documents is sought for the legitimate forensic purpose of challenging Mr de By’s assertions as to his role. PY submits that the question whether the services performed were Australian legal services is a question of substance to be determined having regard to what work was actually performed.
PY identifies a number of matters to support his submission that the work was, or at least there is a strong indication it was, prohibited legal work including retention of counsel, work in relation to costs agreements and retainers, and work involving pleadings, mediation strategy, trial strategy including cross-examination and the sequencing of evidence. The Bill of Costs and Annexure A include numerous references to such work. For example, PY relies on the description of Mr de By’s role in the Bill of Costs:
Legal practitioners
At all times up until trial, the defendant’s sole counsel was Dr Sean Baron Levi, who has experience and expertise in complex international litigation, including international disputes concerning contractual arrangements, fiduciary obligations, accounting standards and principles, the laws of associations, and banking disputes, as well as conflict of laws, all of which arose in these proceedings. Dr Baron Levi has also acted in defamation matters.
FIP’s honorary legal counsel, Robert de By of Connon Wood LLP (based in Los Angeles (US [sic] and London (UK) was engaged by the defendant because of his intimate knowledge of the issues and documents relating to the matter, with FIP’s history and By-Laws, with the world of polo and its management by various national organisations who make up FIP’s members and FIP sponsorship matters, as well as with the defendant personally, and because FIP’s interests were in common with the defendant in relation to the proceedings.
Mr de By knew, had known most of the FIP personnel, and many of the other people involved in the events at issue, for years.
The extent and complexity of the factual issues may have taken an Australian law firm hundreds of hours to come to terms with.
Robert de By was heavily involved (among other things) in the discovery process, including locating and reviewing documents, and in the privilege review process – assessing privilege, for e.g. of documents to or from US counsel. He was heavily involved in the process of interviewing witnesses and potential witnesses. He also instructed generally in relation to the issues and documents, which were matters within his knowledge.
Mr de By is a leading US attorney with an expertise in complex international litigation, and is a former colleague of Dr Sean Baron Levi, having worked as a partner in the international group of the same New York based law firm where Dr Baron Levi worked as a solicitor prior to being called to the bar.
Mr de By instructed Dr Baron Levi and conducted all communications with the defendant and FIP management during the preparation of the defence of the case (emphasis added).
PY also relies on NDC’s submissions filed on 7 October 2022, in which NDC submitted:
CW [Connon Wood], and particularly Mr de By, outside of issues of foreign law, were used principally as instruments and facilitators of evidence, not a source of Australian legal advice. Mr de By dealt with matters “within his knowledge”, and was involved in the discovery and review documents he had a unique understanding of, as well as facilitating interviews of witnesses and potential witnesses by Australian counsel.
In his submissions filed 28 April 2023, PY submits that discovery and review of documents,
‘though not required to be done exclusively by a solicitor, [are] usually done by a solicitor’ and [are] tasks ‘which, in order that the public may be adequately protected, [are] required to be done only by those who have the necessary training and expertise in the law’.[19] Document review and collection where performed by a lawyer constitutes practising law.[20]
[19]Quoting Legal Profession Conduct Commissioner v Morcom (2016) 126 SASR 331, 345 [90] (Kourakis CJ, Blue and Doyle JJ.
[20]Citing Mericka v Rathbone (2016) 125 SASR 563, 589 [145]-[147] (Blue, Bampton and Doyle JJ).
PY refers to numerous items in Annexure A to the Bill of Costs which he submits indicate Connon Wood engaged in prohibited legal practice.
NCD describes the role of Connon Wood as being merely ‘instruments and facilitators of evidence’, which included aspects of discovery and review of documents. NCD also submits that there were significant aspects of international law to consider and that it would be a nonsense to suggest that in a case such as this, the involvement of foreign lawyers in assisting with an understanding of the complicated factual background was practising law for the purposes of regulation of professional conduct.
I do not consider it necessary to resolve the question whether Connon Wood’s conduct constituted legal practice. It is clear that question will be agitated on the hearing of the preliminary question. For present purposes the question is whether the documents sought serve a legitimate forensic purpose in the context of the dispute which includes that question.
NCD submits that s 10 of the LPUL only precludes recovery of fees for work done in contravention of s 10(1), and further submits that as some of the work was clearly not unauthorised, the documents sought cannot be relevant to the question whether the fees are wholly excluded. That is, even if Connon Wood were principal, at least some of the work performed by it was not prohibited legal work within s 10(1) and therefore at least some of the fees will be allowed, with the result that the question whether Connon Wood was principal or agent cannot wholly exclude the fees sought to be recovered.
PY accepts that the prohibition on recovery in s 10(2) of the LPUL relates only to work done in contravention of s 10(1), but says that is not the end of the matter and relies on the distinction between the prohibition on practice (s 10(1)) and the prohibition on recovery (s 10(2)). PY submits that the Court’s power to award costs, in so far as they relate to the charges of solicitor or counsel, ‘is limited to costs of a legal practitioner entitled to practise in this State’.[21] PY relies on the decision of Santos Ltd v Delhi Petroleum Pty Ltd (‘Santos’),[22] in support of the proposition that the Court has no power to award costs of a foreign principal, such as Connon Wood, which is not entitled to practice in the jurisdiction.[23] On that basis, PY submits that a critical issue is whether Connon Wood was in reality the principal, and in order to resolve that issue, it is necessary to consider in some detail the documents sought by the Notice.
[21]Quoting Santos Ltd v Delhi Petroleum Pty Ltd (2005) 240 LSJS 366; [2005] SASC 242, [42] (Bleby J) (‘Santos’).
[22] Ibid.
[23]In his supplementary submissions filed 29 May 2023, PY relied on Deputy Commissioner of Taxation v Clear Blue Developments Pty Ltd (No 2) (2010) 190 FCR 11, 20 [39] (Logan J) and University of Western Australia v Gray (No 25) (2009) 180 FCR 483, 496 [78] (Barker J) in support of the same proposition.
On the basis of the submissions made, it is apparent that there is a live issue whether Connon Wood was principal or agent. Consistently with Santos, it is at least arguable that Connon Wood was the principal and for that reason none of its fees are recoverable. It is not necessary to resolve the question whether Connon Wood acted as principal or agent in providing legal services at this stage. That is a matter for determination on the hearing of the preliminary question. But for present purposes, subject to what is said below, I do not accept NCD’s submission that the documents sought are not relevant to the question whether Connon Wood’s fees are wholly unrecoverable. In that sense, and subject to what is said below, I am satisfied that documents relevant to whether Connon Wood was acting as principal or agent serve a legitimate forensic purpose.
Are Connon Wood’s fees payable in any case under the indemnity principle?
The indemnity principle was summarised by the Victorian Court of Appeal in Mainieri v Cirillo[24] as follows:
[43] In broad terms, the indemnity principle is that, as between party and party, the party ordered to pay the other party’s costs is obliged to pay only those costs which the other party is legally obliged to pay to his or her solicitor. In Wentworth v Rogers, Basten JA distilled the essence of the matter as follows:
[I]t is beyond dispute that the purpose of an adverse costs order is to compensate or partly indemnify one party to litigation (usually the successful party) for the legal costs incurred in the course of the proceedings. The [indemnity] principle does not require that the costs have been paid, but it does require that there be a legal liability to pay costs.
[24](2014) 47 VR 127, [43] (Nettle AP, Hansen and Santamaria JJA) (citations omitted). See Wentworth v Rogers [2002] NSWSC 709, [35] (Barrett J); King v King [2012] QCA 81, [7] (Chesterman JA); Hancock v Rinehart (Lump Sum Costs) [2015] NSWSC 1640, [44] (Brereton J).
More recently in Harvard Nominees Pty Ltd v Dimension Agriculture,[25] the Full Federal Court held:
[18] Costs are awarded by way of indemnity. Therefore, a party seeking a costs order must have incurred a liability to pay those costs. The indemnity principle is flexible and is designed to allow for a just and fair result: Noye v Robbins [2010] WASCA 83 at [332]-[338] (Owen JA, Pullin and Buss JJA agreeing).
[25][2023] FCAFC 140, [18] (Colvin, Stewart and Feutrill JJ).
The evidence as to what fees have been charged and paid is as follows. The amount claimed as a disbursement for Connon Wood’s fees in the Bill of Costs is $1,233,705.54 of which $398,084.45 is said to remain unpaid. PY submits that there is no evidence that Batten Sacks or NCD has paid any fees to Connon Wood, and refers to T Forrest JA’s costs decision in Yunghanns v Colquhoun-Denvers (Costs),[26] in which it was said fees paid to Connon Wood have come either from the Federation of International Polo (‘FIP, or the ‘client’) or via FIP’s insurer. Those reasons record that:[27]
[10] [NCD] refuted the plaintiff’s claim that FIP covered [NCD]’s legal costs. In his written submissions, [NCD] maintained that FIP paid for all disbursements and around 80 per cent of the costs of the Australian lawyers.
[26]Yunghanns v Colquhoun-Denvers (Costs) (n 2) [7], [11], [13].
[27]Ibid [10] (citations omitted) (T Forrest JA).
PY submits that neither NCD nor Batten Sacks were or are under an obligation to pay Connon Wood’s fees and therefore the indemnity principle does not apply.
NCD submits that charges claimed as disbursements are recoverable to the extent they have already been paid, even in the absence of a legal liability to pay those costs. NCD relies on a number of authorities to support that submission. The first case is McCullie v Butler,[28] in which Diplock J considered the amounts charged by Scottish lawyers who were engaged as agents in a case heard in England. Diplock J did not exclude all of the amounts claimed but reduced those amounts to the extent the Scottish lawyers had gone beyond their role as foreign professional agents.
[28][1962] 2 QB 309; [1961] 2 All ER 554, 557 (Diplock J).
The next case relied on by NCD is Catto and Ors v Hampton Australia Ltd (in liq) and Ors (‘Catto’).[29]In that case the plaintiff was ordered to pay the defendants’ costs on an indemnity basis. The defendants’ solicitors had rendered invoices during the course of the proceeding which the defendants had paid. It became apparent that the defendants’ solicitors were not entitled to practise in South Australia at the relevant time, and therefore they would not be entitled to claim such fees from the defendants. The question arose whether the defendants were entitled to recover only those costs that they were legally obliged to pay their lawyers, or whether they were entitled to recover all costs that they had in fact paid irrespective of whether they had a legal obligation to do so. The critical question concerned what was meant by the term ‘costs incurred’ in the relevant rules. At first instance the Master held that the defendants were only entitled to recover those costs they had a legal obligation to pay, and that as their lawyers were not entitled to practice in South Australia, the defendants had no obligation to pay their fees and that therefore, their costs were not recoverable, including those already paid. That decision was overturned on appeal. White J held[30] that ‘costs incurred’ included costs already paid, even where there was no legal obligation because it related to unauthorised legal practice, but ‘costs incurred’ did not include costs in relation to unauthorised legal practice where the costs had not already been paid. The rationale for this distinction between recovery of unauthorised costs that have been paid and unauthorised costs that have not been paid appears to have turned on the meaning attributed to the words ‘costs incurred’ being the relevant limiting words in the relevant rule, and the underlying purpose of a costs order to indemnify the party who has paid them. This is consistent with White J’s consideration[31] of Elders Trustee and Executor Co Ltd & Anor v Estate of Herbert & Anor (‘Elders’),[32] in which Kearney J held that costs that had already been paid had been ‘incurred’ for the purposes of the relevant rule in that case.
[29](2008) 257 LSJS 245; [2008] SASC 231 (‘Catto’).
[30]Ibid [45] (Vanstone J agreeing at [1], Anderson J agreeing at [2]).
[31]Ibid [39], [41].
[32](1996) 5 NTLR 123 (‘Elders’).
NCD submits that the implication of Catto has been affirmed in Hancock v Rinehart (Lump Sum Costs) (‘Hancock’).[33]In Hancock, the relevant question was whether a party can recover from an opposing party against whom a costs order has been made, costs paid to their solicitor ‘notwithstanding that they could not have been enforced by the solicitor against the client.’[34] Brereton J discussed the indemnity principle generally, observing that it applied equally to ordinary costs and indemnity costs, and further held that the circumstances in which a party may recover costs when there was no legal obligation to pay them were ‘constrained’,[35] citing Wentworth v Rogers (‘Wentworth’).[36] In Wentworth, Barrett J held:[37]
[35] It is appropriate to look next at the provisions in Division 6 dealing with the quite separate and distinct subject of costs awarded by courts. That examination needs to be undertaken against the background of the general principle that costs awarded by order of a court are intended to indemnify (commonly only partially) a successful party who has incurred a liability for costs in relation to the proceedings. The existence of a liability of the client to pay costs lies at the centre of this concept, but it is clear that costs may in certain special and limited circumstances be recovered under an order for costs even where there is no right of recovery by the lawyer against his or her client. A common case is where the lawyer is an employee and represents his employer’s interests in court without right to or expectation of reward apart from the salary which is payable regardless of the nature or quantity of legal work undertaken: see the comprehensive treatment of this subject in the judgment of Davies AJ in Commonwealth Bank of Australia v Hattersley (2001) 51 NSWLR 333. Another instance is where a lawyer resorts to self-help by performing legal work in proceedings in which he or she is a party. In Atlas v Kalyk [2001] NSWCA 10, the Court of Appeal held that the decision of the High Court in Cachia v Hanes (1993) 179 CLR 403 as to self-represented litigants generally did not disturb that court’s earlier recognition of the lawyer self-help exception in Guss v Veenhuissen (No 2) (1976) 136 CLR 47.
[36] Apart from special circumstances and exceptions of this kind, absence of the lawyer’s right to recover remuneration from his or her client will mean that a costs order in favour of the client will be unproductive.
[33][2015] NSWSC 1640, [38]-[47] (Brereton J), quoting Motor Trades Association of Australia Superannuation Fund Pty Ltd v Rickus (No 6) (2010) 223 FCR 261, 270-272 [32]-[39] (Flick J).
[34]Ibid [40] (Brereton J).
[35]Ibid [37].
[36][2002] NSWSC 709, [29] (Barrett J).
[37]Ibid [35]-[36].
In relation to the applicable principles, PY submits that Catto, and the other cases relied on, may be distinguished as they relate to the specific legislative regimes governing costs in those instances. I agree. There does not appear to me to be a sound basis to extrapolate from Catto, or the other cases relied on, a general principle applicable in all cases regarding recovery of unauthorised fees under the LPUL. I note for example there does not appear to be any equivalent provision in the South Australian legislation applicable in Catto to s 10(2) in the LPUL which requires any fees to be repaid where they have been paid for work done in contravention of the prohibition to such practice. The decision in Catto was justified by White J on the basis that it was:[38]
consistent with the notion that costs are awarded to a party by way of indemnity. They are “intended to reimburse a litigant for costs actually incurred”.
[38]Catto (n 29) [34], quoting Cachia v Hanes (1994) 179 CLR 403, 414 (Mason CJ, Brennan, Deane, Dawson and McHugh JJ).
That leads to the broader point that the indemnity principle, and the circumstances in which unauthorised fees may be recoverable, are founded in the notion of indemnification for costs actually paid, or that may be recovered from the client by their solicitor. The limits of the indemnity required in this case to ‘reimburse a litigant for costs actually incurred’ may depend upon a combination of factors including: the extent of the legal liability to pay costs; how much has in fact been paid; how much, if any, of the fees paid may need to be reimbursed; and whether the fees were paid to a legal practitioner entitled to practice in the jurisdiction. In my opinion, documents going to the question of the role undertaken by Connon Wood serve a legitimate forensic purpose.
Is there an automatic presumption that Batten Sacks is the principal lawyer?
NCD submits that as Batten Sacks is the solicitor on the record there is ‘an automatic presumption’ that Batten Sacks was the principal and Connon Wood was its agent. NCD relies on Elders Trustee & Executor Co Ltd v Estate of Herbert (‘Elders’)[39] in which principal solicitors from South Australia engaged Northern Territory solicitors to act as agents in the conduct of litigation in the Northern Territory. Section 22(4) of the Legal Practitioners Act 1983 (NT) provided:[40]
A legal practitioner is not entitled to recover any costs or disbursements in respect of any work of a professional nature done by him as a legal practitioner if, at the time at which the work was done, he was not the holder of a current unrestricted practising certificate or restricted certificate class 2.
[39]Elders (n 32).
[40]Ibid 131-132 (Gallop J, Thomas J agreeing at 138).
The Court held that, notwithstanding the terms of s 22(4), interstate solicitors not entitled to practice in the NT can conduct litigation in the NT as principal solicitors and are entitled to recover their costs and disbursements from their client.[41] The Court also held that if the client obtains a costs order and has paid the costs of the interstate solicitor, the client can recover those costs from the other party.[42]
[41]Ibid 132-133 (Gallop J, Thomas J agreeing at 138).
[42]Ibid 133 (Gallop J, Thomas J agreeing at 138).
It is difficult to reconcile the approach of the Court in Elders with the language of the relevant sections of the LPUL quoted above, particularly those provisions that explicitly deal with the limitations on practice by foreign lawyers. I note that Elders and the case of Mitchell v Mitchell (‘Mitchell’)[43] (also relied upon by NCD) were both distinguished in Santos,[44] generally speaking on the basis of the difference between the statutory regimes that applied in each case.
[43](1971) 19 FLR 100.
[44]Santos (n 21) [44]-[46] (Bleby J).
NCD also relies on Maggbury Pty Ltd v Hafele Australia Pty Ltd,[45] Mitchell and New Cap Reinsurance Corp Ltd v General Cologne Re Australia (No 2)[46] each of which, he submitted, is consistent with Elders. However, each of those cases dealt with particular legislative regimes. It is not sufficiently clear to me that if Connon Wood’s conduct transgressed the prohibitions in the LPUL, that their costs, charged by Batten Sacks as a disbursement, must be allowed based on any presumption established by these cases. In short, I do not consider that these cases preclude the legitimate forensic purpose otherwise established by NY.
[45][2001] QSC 78.
[46][2005] NSWSC 276.
Further, the nature of a presumption is that it may be displaced by evidence,[47] such as may be disclosed in the documents sought by PY. If, as appears to be the case, NCD intends to argue on the hearing of the preliminary question, that there is a presumption that Batten Sacks is the principal solicitor and Connon Wood the agent, that strengthens PY’s submission that documents tending to establish that Connon Wood was in fact the principal are relevant and serve a legitimate forensic purpose.
[47]See, eg, Melbourne Orthopaedic Group Pty Ltd v Stamford Aus-Trade & Press Pty Ltd [2015] VSCA 150, [18] (Santamaria JA, Ashley JA agreeing at [1], Digby AJA agreeing at [144]).
Is the Notice being used as a substitute for discovery?
It is uncontroversial that a notice to produce must specify with reasonable particularity the documents to be produced, and that it is not permissible for a notice to produce to be used as a substitute for discovery.[48] The essential feature of discovery, as opposed to production under a notice to produce, is that the discovery process requires that the person who is to produce the documents ‘will have to make a judgment as to which of his documents relate to issues between the parties.’[49]
[48]1045 Burke Rd Pty Ltd v Bosi [2018] VSC 157, [37] (Derham AsJ); Macks v Tucker (No 4) (2007) 250 LSJS 49; [2007] SASC 255, [30] (Bleby J) (‘Macks’).
[49]National Employers’ Mutual General Insurance Association Ltd v Waind [1978] 1 NSWLR 372, 382 (Glass J, Moffit P and Hutley JA agreeing at 374).
For the purposes of argument, the parties divided the documents sought into the following classes:
(a) documents numbered 2-20, in which PY seeks specifically identified emails and letters;
(b) documents numbered 1, 5 (second part) and 21-97, in which PY seeks documents ‘comprising or otherwise evidencing’ the professional services or work described in bill items; and
(c) documents number 98-100 in which PY seeks ‘costs agreements or other retainer documents’.
In my opinion, the descriptions in items 2–4, 6–20 and 98–100 provide sufficient detail that they do not offend against any principle against discovery. Nor do I consider that it would be onerous or oppressive to produce them.
In relation to the documents in items 1, 5 and 21-92, NCD submits that the Notice is liable to be set aside as it seeks discovery rather than production of sufficiently identified documents. NCD submits that those items do not seek production of identified documents, but rather seek discovery of evidence of the various activities identified. By way of example NCD notes that they seek documents that ‘comprise’ or ‘otherwise evidence’ the professional services in relation to which fees were charged including: ‘trial preparation’ (see, eg, categories 62, 63, 81, 88); ‘attention to trial preparation’ (category 84); ‘attention to trial strategy’ (category 85); ‘attention re payments and wire transfers’ (category 84); ‘attention to documents and exhibits’ (category 85); ‘billing and admin’ (category 93); reviews (see, eg, categories 25-27, 29, 30, 33-36, 39, 41, 42, 69, 91); analyses (see, eg, categories 25, 26, 36, 41); considerations (category 40); revisions (categories 21 and 33); communications (see, eg, category 21); conferences and meetings (see, eg, categories 38, 43, 44, 54, 64, 66-68, 86-89) and attendances (see, eg, category 1). NCD submits that few if any of the activities are described in terms of creation of a document and therefore what is really being sought is evidence of the activities identified. Further, NCD submits that the descriptions are those of a third party (Connon Wood) and accordingly NCD would be required to interpret the shorthand items in the bill and then search for documents that may ‘comprise’ or ‘otherwise evidence’ such activities.
PY submits that the requirement to produce documents ‘recording or evidencing certain matters’ does not require a judgment to be exercised on the part of the recipient. PY relies on the decision in Macks v Tucker (No 4) (‘Macks’)[50] in which a party objected to a subpoena on the basis that it sought discovery. The documents sought in that case included documents ‘recording or evidencing’ various matters including: ‘indebtedness’, ‘a decision to seek bankruptcy’, ‘steps taken to recover moneys’ and ‘the funding of the joint venture.’[51] Bleby J held that the seeking of documents ‘recording or evidencing’ those matters did not require a judgment to be exercised as to what is to be produced.[52]
[50]Macks (n 48).
[51]Ibid [3] (Bleby J).
[52]Ibid [29].
PY submits that Batten Sacks and Connon Wood were both intimately involved in the litigation, so there should be no difficulty in Batten Sacks locating such documents as respond to the relevant entries. PY further submits that Batten Sacks is now seeking Connon Wood’s costs on taxation, and in that exercise he will presumably be relying on the documents in Annexure A of the Bill of Costs. PY submits that will require NCD to satisfy the taxing officer that the item claimed was “necessary or proper” (within the meaning of r 63.29)’[53] and ‘reasonable having regard to the discretionary considerations provided for in r 63.48(2).’
[53]PY’s submission referred to r 63.29 which related to party-party costs under the previous rules and which was replaced on 1 April 2013 by r 63.30, which describes costs recoverable on a standard basis as being those that are ‘costs reasonably incurred and of reasonable amount’.
I do not consider that items 1, 5 and 21-92 constitute an impermissible request for discovery. Each of the items in relation to which relevant documents are sought are either items in relation to which costs incurred are sought to be recovered or, where the items have been struck through, are items which describe documents going to whether Connon Wood was principal or agent, which is a question for determination at the hearing. The descriptions of the documents sought are all confined by Connon Wood’s own descriptions, including dates, in its bill of costs, which is at the heart of the matter in issue. I consider that this approach is consistent with that taken in Macks discussed above.
Is the Notice oppressive, overly broad or prejudicial?
The exercise of deciding whether a notice to produce is oppressive is:
…a multifactorial balancing one. Where the documents called for have a high degree of apparent relevance to issues in the proceedings, the court will not shirk from requiring third parties to undertake considerable burdens to search for and produce such documents. On the other hand, where the documents are of slight or little apparent relevance, the extent of the burden cast on the party called to produce documents will weigh much more heavily against allowing the [notice to produce] to stand.’[54]
[54]Tony Azzi Automobiles Pty Ltd v Volvo Car Australia Pty Ltd [2006] NSWSC 283, [6] (Brereton J) considering in that instance whether a subpoena was oppressive. The principle expressed applies equally to notices to produce and subpoenas: [4] (Brereton J).
Expressed another way, ‘[t]he real question is whether production of the range of documents sought in the [Notice] is necessary and appropriate for the just, efficient, timely and cost-effective determination of the proceeding’.[55]
[55]Cargill (n 6) [37] (Elliott J).
NCD submits that the task of responding to the Notice would be oppressive, and akin to a major discovery exercise, potentially involving hundreds of hours and enormous and prohibitive costs having regard to the extent of the enquiries necessitated by a complete response. NCD submits that many of the documents sought are likely to be documents solely in the possession of Connon Wood and that they are no longer retained by NCD, and that they have said they require NCD to pay nearly USD 500,000 in outstanding fees before they were prepared to conduct any further work in searching for documents. NCD also submits that the Notice is oppressive insofar as many of the categories of documents sought relate to entries that form no part of the Bill of Costs, the entries having been struck through in part or whole.
The submissions made by PY referred to above respond to these submissions. That is, PY submits that Batten Sacks and Connon Wood were both intimately involved in the litigation, so there should be no difficulty in Batten Sacks locating such documents as respond to the relevant entries. PY further submits that Batten Sacks is now seeking Connon Wood’s costs on taxation, and in that exercise he will presumably be relying on the documents in Annexure A of the Bill of Costs. As noted above in para 53, PY submits that will require NCD to satisfy the taxing officer that the item claimed was “necessary or proper” (within the meaning of r 63.29)’[56] and ‘reasonable having regard to the discretionary considerations provided for in r 63.48(2).’ In that context it is helpful to bear in mind the landscape within which this issue arises. A bill of costs has been served claiming $398,084.45 in costs and $1,233,705.54 as a disbursement for a foreign lawyer. There are questions around whether Connon Wood’s fees are recoverable. NCD submits that because Connon Wood’s fees have been paid, they are payable as a disbursement and seeks to prevent PY interrogating the foreign lawyers’ costs.
[56]See n 53.
I accept that the task of responding to the Notice will be burdensome for NCD and Batten Sacks, but there is a significant amount at stake, and in my opinion, balancing all of the factors involved, I am not satisfied that the Notice is oppressive, overly broad or prejudicial.
For those reasons the application to set aside the Notice must fail.
0
19
8